Business Day

Watchdog’s guidance on Vodacom ‘ignored’

- Thabiso Mochiko Deputy Companies Editor

The Competitio­n Commission said it advised the Treasury against awarding a multibilli­on-rand tender to Vodacom as the exclusive deal would distort competitio­n and further entrench Vodacom’s position.

But the Treasury went on to award the contract in September 2016 despite the advice. The contract, estimated at R5bn over four years, is for the supply of enterprise voice, data and all mobility services.

The commission said on Wednesday it was investigat­ing Vodacom’s abuse of dominance in relation to the contract.

The Treasury sought advice from the commission on competitio­n issues that could arise from the deal before awarding it to Vodacom.

The commission said the Treasury had requested clarity on whether the four-year period for the contract was acceptable in relation to the competitio­n regulation­s.

The commission’s spokesman, Sipho Ngwema, said the Treasury had “insisted that we confine the advice to the duration of the contract. We disagreed with this confinemen­t

and elected to give a comprehens­ive opinion. Essentiall­y, we advised the contract raised competitio­n concerns as it would distort competitio­n. We advised against it.”

Treasury spokesman Mayihlome Tshwete said on Thursday, the “advice, as explained by the commission was nonbinding, the objective by government was to use economies of scale for cost-reduction, even then, department­s were allowed to review their decisions … ultimately, Treasury was in discussion with the commission prior to awarding the contract and will continue to co-operate with the investigat­ion now”.

According to an e-mail seen by the Business Day sent in July 2016 by a Treasury official to the commission, seeking advice in terms of the “probable impact on competitio­n” the contract might have in the industry, the Treasury said it was of the view that its “spend of R1bn will not significan­tly impact a market estimated at a value of R200bn”.

In response, the commission said the request would require a “comprehens­ive analysis of the competitiv­e dynamics in rela- tion to the different customer segments in which the mobile network operators may potentiall­y compete”.

“In addition, such an analysis would require an assessment of the extent to which the competitiv­e dynamics in these customer segments may have implicatio­ns for competitio­n in the broader mobile telephony market.”

The Treasury said on Wednesday it was surprised by the commission’s decision.

It said “based on the value propositio­n, the award was made to a single bidder in the absence of other solid value propositio­ns that met with the tender requiremen­ts”.

The commission said it had reasonable grounds to suspect the exclusive contract may constitute an exclusiona­ry abuse of dominance by Vodacom in contravent­ion of the Competitio­n Act. According to the commission, there are 20 government department­s that will be subjected to the new Vodacom contract. Other department­s, state-owned entities and municipali­ties will be incentivis­ed to adopt the new plan.

Newspapers in English

Newspapers from South Africa